‘Seaspiracy’ showed ESG needs blue to be truly green
Updated: Jul 12, 2021
Written by Damian Payiatakis, head of sustainable and impact investing at Barclays. This piece was originally written for Impact Agora and appeared on New Model Adviser.
Nearly four years since David Attenborough’s Blue Planet II alarmed viewers with the impact of plastic waste in our oceans, Netflix documentary Seaspiracy has sought to do the same for commercial fishing.
Whether they prompt sorrow, controversy, or indifference, the popularity of these programmes illustrates a fundamental shift in mainstream investors’ perceptions and concerns about the environment. They also raise a question about progress and gaps in how advisers serve clients.
Clients increasingly want their capital to have a positive impact on this issue, and simultaneously fulfil, protect and grow their wealth. Seeking investment opportunities in the ocean economy, particularly in the private markets, may meet both aims.
Toes in the ocean
Our oceans make up around two-thirds of our planet, and provide half the oxygen we breathe. According to the World Economic Forum, they have the potential to absorb around a third of global CO2 emissions, making them critical in the fight against climate breakdown.
Yet the vast majority of focus in environmental investing is around ‘green’, rather than ‘blue’ opportunities. Conservation of the ocean – and sustainable use of its resources – has attracted just 3.5% of overall investment towards the UN’s Sustainable Development Goals.
At the same time, according to a World Wildlife Fund (WWF) report, the goods and services the come from the ‘blue economy’ are valued at around $2.5tn (£1.7tn) each year. That makes the ocean the seventh-largest economy in the world.
Investors have plenty of opportunities to dip their toes, from renewable energy projects, fishing, aquaculture, shipping, plastics, conservation, and tourism.
Given the breadth and scale of this market, it would be a missed opportunity to swerve using ocean investing for good.
From risk to opportunity
There is no doubt ESG and sustainability have become fashionable topics in the investment world. Discussions about ESG bubbles and greenwashing are accelerating as a result, as awareness increases of the topic’s teething issues. Much of the investment industry focus is on public markets, where its primary role is risk mitigation in how companies operate.
Avoiding the environmental, social, and governance risks within companies active in the ocean economy is a critical foundation for investment managers.
We can see this illustrated in Seaspiracy, which, for all its faults, highlighted commercial fishing’s relationship with plastic waste, slave labour, and illegal fishing operations.
Advisers investing responsibly on behalf of clients should be conducting similar ESG assessments of environmental impact, supply chain issues and compliance for any company they put money in. However, we increasingly hear investors telling us that avoiding harm or risk is not enough. They want to invest in organisations making a direct difference to a problem. Where does that leave ocean investing?
Deep private markets
Private markets provide an interesting option to people looking to invest more actively with tangible impact. It is also an option our clients are increasingly demanding.
Research by private markets fintech firm Delio into wealth managers found 69% of high-net-worth clients are seeking illiquid investment opportunities. Simultaneously, one in four reported they had lost clients because they had been unable to hold private market investments.
While having a larger risk and reward potential, they offer attractive diversification and long-term alpha generation alternatives. From an impact perspective, clients see their investments more actively contributing to solutions rather than just avoiding harm. By supplying capital to companies looking to grow, they provide a strong stimulus to environmentally beneficial companies.
This shift is happening with family offices already active in this space.
In the 2020 Investing for Global Impact report, which Barclays Private Bank produced in partnership with Campden Wealth and Gist, 86% of respondents indicated they had made impact investments in private markets. Given the relatively slow flows into the blue economy, there is an opportunity for investors to get involved.
Knowing where to fish
Historically, offering private market opportunities has been complex and challenging for advisers.
Like many, we are now using innovative technology to engage clients and scale our offering in private markets.
One huge benefit it provides is addressing fragmentation within private markets. We have been supporting a community of institutional players in the impact investing sphere to encourage them to connect on the same technology. That has originated a wider set of opportunities for clients and a shared network through which to invest.
In support of Monaco Ocean Week in March 2021, this community’s focus turned to the blue economy, demonstrating the value of awareness and action in an under-invested sector. We have seen more active interest between ocean economy ventures and investors as a result.
The plastics industry was permanently damaged by Blue Planet II, whose final episode showed the pacific ocean’s great garbage patch, and a turtle entangled in plastics. Thoughtful investors have anticipated, followed, and further driven this shift. Whether Seaspiracy alone provokes a similar change for commercial fishing is yet to be seen.
Either way, helping our clients with their financial and sustainability ambitions helps to build stronger relationships with them. Providing capital to help ensure a healthy ocean can be a key pillar in our fight against climate breakdown and ensure ongoing biodiversity for all our benefit. There is no ‘green’ without ‘blue’.